review 1 theme a

Question 1

outline the difference between budget deficit and national debt

Answer 1

a government budget deficit occurs when government spending is greater than revenue in one year

government debt is the cumulative total of all money owed by government as a result of borrowing

Question 2

outline the difference between demand pull inflation dn cost push inflation

Answer 2

demand pull inflation is caused by a shift outwards to the right of aggregate demand

cost push inflation is caused by a shift inwards to the left of (short run) aggregate supply

Question 3

what compost of the ups current account on the balance of payments would include profits generated by overseas investors on their fdi

Answer 3

net primary income

Question 4

what does it mean if there is falling unemployment

Answer 4

that the level of gdp growth is rising

Question 5

what does a rise in job vacancies indicate

Answer 5

that there is a rising derived demand for labour

Question 6

gdp growth and unemployed labour links

Answer 6

duw to the gdp growth which cannot be filled by available unemployed labour

Question 7

short run aggregate supply

Answer 7

is shifted by changes in business running cost such as wages, raw material or indirect tax

Question 8

long run aggregate supply

Answer 8

long run aggregate supply is shifted by changes in the quantity and quality of factor of production represented by land labour capital or enterprise

Question 9

outline one factor that could result in a government having a budget surplus

Answer 9

strong economy increasing tax revenues

Question 10

long run is defined

Answer 10

the period in which all factors of production might vary

Question 11

short run defined

Answer 11

the period in which at least one factor of production remains fixed

Question 12

explain one reason for a decline in the maximum output level of an economy

Answer 12

labour because if the level of unemployment decrease the maximum output poteiental depends on the factors of production available and their productivity

Question 13

explain two in which government could use fiscal policy to imp[rove labour productivity

Answer 13

policies might include spending on education and/or skills training: subsidies for research and development; tax breaks for technological investment

Question 14

GNP

Answer 14

gross domestic product plus net income from abroad

Question 15

deprivation on the exchange rate

Answer 15

A depreciation increases the cost of imports so there will be an increase in cost-push inflation. A depreciation makes exports more competitive – without any effort. In the long-term, this may reduce incentives for firms to cut costs, and could lead to declining productivity and rising prices

Question 16

are supply side polices alone enough

Answer 16

supply side polices alone are rarely sufficent to achieve growth. there must also be high enough level of aggratege demand so that the increased supply side capacity of the economy is actually used

Question 17

government spending on education ?

Answer 17

improves human capital but this also has the knock on effect of improving physical capital as opptunities for innovation arise with increased educational presence such as in universities

Question 18

government spending on education structaul unemployment

Answer 18

reduced as it provides training such as for those made recently unemployed in a previous industry and the occupational mobility of workers is improved